Mutual Funds

Mutual funds have a long and distinguished history in Canada allowing investors to provide a better diversification of their portfolios to help maintain lower risk with maximum return.

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What Is A Mutual Fund?

A mutual fund is a pool of money that investors add to in order to purchase various types of investments and securities which is managed by a professional money manager. This allows for an investor to own more investments than what they could have bought on their own with a greater diversification. The added diversification can help to reduce the risk to the investor by not having all of their eggs in one basket.

 

Types of Mutual Funds

There are many types of mutual funds with various levels of risk ranging from totally secure to completely speculative. The seven most common types are;

  1. Money Market funds – these types of funds invest in cash and cash equivalent investments like treasuries which are safe but earn very little interest.
  2. Fixed Income funds – these funds invest in government and corporate bonds and some mortgages which pay a fixed rate of return by earning interest. These funds are more risky than money market funds as there prices can fluctuate up and down.
  3. Mortgage funds – these types of funds attempt to generate income for the investor by investing in various types of mortgages. These funds can pay a higher rate of interest due to the default risk of mortgages.
  4. Balanced funds – these type of funds invest in a mix of equities and fixed income securities to help balance the objective of achieving a higher rate of return with maintaining a lower level of risk which means they are riskier than mortgage or fixed income funds but not as risky as equity funds.
  5. Growth & Equity funds – these types of funds invest in various types of equities and income trusts offered through the various stock markets around the world. For this reason these funds do offer a better chance at a greater gain but with a higher risk of losing as well.
  6. Index funds – these funds invest in equities or fixed income securities to mimic a specific index such as the S&P/TSX Composite Index. These types of funds are also known as passively managed funds since the manager only adjusts the securities to stay inline with the makeup of the respectful index.
  7. Specialty & Sector funds – these funds buy securities in a one specific region (such as Asia or emerging markets) or they could invest in one specific sector of the market place such as (precious metals or technology). These funds tend to be very speculative with a potential for either a very large loss or an equally large gain

With over 70 years of combined experience in the mutual funds industry, wisdom and knowledge of these diverse investments has allowed our clients to grow their portfolios with as little risk as possible. We continue to offer free consultations with no obligation for all new and existing investors. Click here to receive a free consultation.